Brazil's government will report August budget data Monday, with the primary surplus expected at BRL1.6 bln vs. BRL2.3 bln in July. We think that if negative fiscal trends continue, Brazil runs the risk of a downgrade. S&P moved the outlook on its BBB rating from stable to negative back in J…

This Great Graphic was posted in the Wall Street Journal, which it got from R&D Magazine. It shows research and development expenditure in billions of dollars and as a percent of GDP.
Expenditures in dollar terms favor the larger economies. This is in fact born out. The four largest economies have the largest R&D expenditures (US, …

The US dollar is narrowly mixed amid heightened political concerns. A shutdown of the US federal government looks increasingly likely and the withdrawal of the center-right ministers has prompted a crisis in Italy. Global equities have been undermined, with the MSCI Asia-Pacific Index off almost 1.5%, and the MSCI Emerging Market Index off 1%.…

The fourth quarter begins with a bang. The US government risks closure due to an inane argument over authorizing continued government spending and issuing debt to cover the past spending that was authorized. Provided the US government is open, the important monthly jobs report is due out at the end of the week. The Italian government appears to …

Pieces of Eight: Drivers in the Week Ahead
Reviewed by Marc Chandler
on
September 29, 2013
Rating: 5

This Great Graphic was posted on Business Insider by Sam Ro, who got it from the Chicago Fed President Charles Evans. It shows the US government's contribution to GDP. The fiscal drag that the US is experiencing now appears to be the largest in modern times--last half century.
Despite the name calling in the blogosphere, President Obama i…

Great Graphic: The Real Drag of Government
Reviewed by Marc Chandler
on
September 28, 2013
Rating: 5

We had anticipated that the market's disappointment with the Federal Reserve would initially weigh on the dollar, but we had thought the focus would shift back toward Europe, especially after the German election. We anticipated that, by default, this would be more supportive of the dollar against the major currency currencies after it had tr…

This Great Graphic comes from the folks at Markit, who coordinate and conduct the purchasing managers surveys. These reports typically track economic activity fairly well and have become important for both investors and policy makers. In recent months, the ECB has frequently cited the survey data to confirm the recovery in the euro area. That s…

The US dollar remains primarily confined to yesterday's trading ranges and has spent most of the week consolidating within the ranges established after the Fed's decided not to taper its purchases of long-term assets last week. There had been much potential, with the German election, the flash PMI data, US fiscal morass, and month and qu…

Week with Much Potential is Ending with a Whimper
Reviewed by Marc Chandler
on
September 27, 2013
Rating: 5

This Great Graphic, composed on Bloomberg, is fascinating. It tracks the 4-week moving average of weekly initial jobless claims and inverts the line. The decline in weekly jobless claims is now shown as a rising line depicting the improvement in this measure of the labor market. The yellow line is the S&P 500.
The two have been tracking e…

There are four developments in China to note. First, in what seems a bit like "buy the rumor sell the fact" type of activity, the Shanghai Composite slipped 1.9% today to a three week low. Reports suggest profit taking is on issues that were bid up on the announcement that a free-trade zone was going to be established in Shanghai. Se…

The US dollar appears somewhat firmer today, but is in fact consolidating. Against most of the major and emerging market currencies, it remains largely confined to yesterday's ranges. The downside momentum that had threatened to build has dissipated. One of our thematic points was that the next leg up for the dollar might be more driven by …

Investors continue to wrestle with the implications of the Federal Reserve's decision last week not to taper. What is being generally overlooked is that a full third of the market, according to various polls, did not expect the Fed to taper.
Many journalists were surprised, and this seems to be coloring their coverage. For example, just ye…

Thoughts on Hump Day
Reviewed by Marc Chandler
on
September 25, 2013
Rating: 5

Italy's benchmark 10-year bond yield has fallen about 20 bp since the Fed's decision not to taper and it has moved back below comparable Spanish yields, but its problems have not diminished. Rumors of a downgrade that circulated in the European afternoon reflect ongoing concerns.
S&P had cut Italy's sovereign rating to BBB in Ju…

This Great Graphic was posted on Business Insider by Sam Lo, who got it from Neil McLeish, a fixed income analyst at Morgan Stanley. It depicts total debt (household, financial firms, corporates and government, divided by GDP). Most of the chart (yellow line) tracks the US, though more recent European date is included (green line).
The rising…

Great Graphic: US Deleveraging, Europe Still Leveraging?
Reviewed by Marc Chandler
on
September 24, 2013
Rating: 5

The US dollar is generally firm, though gains against the antipodeans and sterling are somewhat larger. These were the currencies that had been the strongest last week, and the stalling of the upside momentum, rather than fresh fundamental developments appear to be the major catalyst. The euro posted an outside down day yesterday (trading on bot…